Units of American Express Co., Citigroup Inc., and MBNA Corp. took the top honors in J.D. Power and Associates' latest quality survey of the credit card industry.

Amid a show of strength by some of the biggest and most aggressive companies in the business, American Express' Optima card finished first in customer loyalty in the broad gold/classic category. It edged out last year's leader, Chase Manhattan Corp.'s cobranded card with Wal-Mart Stores.

In the rewards-card category, another Optima product, the Delta Airlines SkyMiles card, tied for third-as did Chase's Shell Oil card. The Citibank- American Airlines AAdvantage card was first, followed by United Airlines Mileage Plus, issued by a subsidiary of Bank One Corp.

MBNA America Bank, Citibank, Bank One's First Card unit, and Chase, in that order, were the only ones that exceeded or equaled the average customer-loyalty index that J.D. Power calculated for the platinum card category.

One conclusion from the annual J.D. Power cardholder loyalty study-the Agoura Hills, Calif., research firm interviewed 10,420 consumers in March and April about 35 products from the 17 largest credit card issuers-was that pricing isn't everything.

Though industry leaders commonly use teaser rates to attract new accounts and advertise the competitiveness of their annual percentage rates, there is no assurance, once a card is in a wallet, that it is going to stay there, said Andrew March, director of financial services at J.D. Power.

The organization refines its card survey each year. For 1999, it did not focus solely on customer satisfaction, but also took into consideration cardholders' current usage of cards and their plans for future usage.

The methodology would favor card issuers that successfully concentrate on customer service and retention. American Express and MBNA have strong reputations in those areas.

Furthermore, customer loyalty is a hallmark of airline-mileage cards, which may help account for the fact that the highest J.D. Power index scores in the rewards category exceed the others.

Long considered the king of mileage cards, Citibank's American Airlines AAdvantage bettered its below-average performance of a year ago to score 108 on the Power scale.

First Card Mileage Plus-First Card was a brand name of First Chicago Corp. that has been absorbed by Bank One Corp.'s First USA division-was second at 106. The American Express-Delta SkyMiles offering, Chase Shell, and Household International's General Motors MasterCard tied at 103, two points above the rewards-card average.

Morgan Stanley Dean Witter & Co.'s Discover card fell from its No. 1 position last year to "below average." J.D. Power does not elaborate on the attributes of a "below average" rating, nor does it indicate how far below an offering might be. It said Discover usage as well as customer satisfaction levels declined.

Mr. March, who is based in Westport, Conn., for J.D. Power, said the best frequent-flier cards' high scores were affected by Discover's decline and by the altered study methodology.

"The strong present usage of AAdvantage and Mileage Plus, in particular, really helped their rankings this year," Mr. March said.

Airline and other reward cards are prized by issuers. J.D. Power found that among customers with an average of four bank credit cards, a reward card accounts for up to 50% of spending.

That spending, however, does not necessarily translate into interest income, as 71% of frequent-flier cardholders do not revolve their balances, compared with 51% for the industry as a whole.

In platinum cards, MBNA, at 104, catapulted ahead of Chase Manhattan and Citibank, which were first and second, respectively, in 1998.

In gold and classic cards, 97 was enough to make American Express' Optima No. 1. That was one point better than Chase Wal-Mart, two better than Wells Fargo & Co., MBNA, and Citibank's AT&T Universal, and four better than the industry average.

Optima was said to be weak in present usage, but its strong customer- satisfaction and future-usage scores overcame that. The Chase's Wal-Mart card's main strength was customer satisfaction, which was the sole focus of last year's survey.

The study found that the service experience remains the key differentiator when cardholders decide which cards to keep and use. Call- center contact and satisfaction with billing, payment processing, and issuer reputation are the most important elements to satisfaction, according to J.D. Power.

Bank One's First USA, Capital One Financial Corp., and Providian Financial Corp.-specialty companies traditionally defined as monolines-were below average in both platinum and gold/classic. This underscored the limits of pricing appeals. Both First USA and Capital One came out with 9.9% platinum cards last year. Providian has made platinum card offers as low as 0% on balance transfers, jumping to a fixed rate of 7.9%.

Mr. March said aggressive pricing can backfire because it attracts customers who are constantly looking to move for the next-best deal.

Platinum cards, which were intended by card issuers to have an air of exclusivity, have lost their luster and are primarily being used as "debt instruments," Mr. March said.

Last year the platinum card accounted for 42% of consumer spending, and this year it dropped to 34%. At the same time, it accounted for 43% of outstanding monthly balances, more than reward cards, which accounted for 35%, and gold cards, 38%.

"The plus is that the issuer gets 75% of its revenue from interest," Mr. March said. "But we find that when cardholders start using a card as a debt instrument, their loyalty goes down."

In a new Internet-specific section of the study, J.D. Power found that consumers who apply for a card on-line carry 77% higher outstanding balances than other cardholders and are twice as likely to miss scheduled payments three or more times a year.

In addition, Internet cardholders are 33% more likely to apply for a credit card to take advantage of teaser rates or to purchase another vehicle to accrue debt, the study said.

"Consumers who apply for credit cards through the Internet have a delinquency rate that is dramatically higher than other cardholders'," Mr. March said. "The Internet is a powerful marketing tool, but it is not without its pitfalls and must be managed closely by credit card providers."

Bruce Brittain, of Brittain Associates Inc., an Atlanta research firm, said he came up with similar findings recently.

"We found that people who applied for a card on-line tended to be younger and had fewer assets," Mr. Brittain said.

The Power study also found that contrary to industry perception, cardholders who use the Internet to get account information -3% of the total-contact customer service departments more often, driving up the call center costs that issuers were hoping to avoid.

Some industry analysts scoffed at the notion that customer service drives loyalty. Most cardholders rarely call a customer service center, Mr. Brittain said.

"For people who are creditworthy, interest pricing always makes a difference," he added.

Michael Auriemma, head of Auriemma Consulting Group in Westbury, N.Y., said price is driving the market.

He agreed with J.D. Power that low pricing can bring in customers who are less loyal. But "if the price isn't right, I don't care what the product is-it's not going to sell," Mr. Auriemma said.

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